Does the extra payment go entirely to principal?
Yes! Assuming you have no outstanding fees or late penalties, extra payments are applied 100% directly to your principal balance, which immediately reduces the interest you owe next month.
Calculator
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Analysis
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How to Use
Step-by-step instructions
- 1Enter your current remaining mortgage balance.
- 2Input your interest rate.
- 3Enter how many years are left on the loan.
- 4Input the extra amount you plan to pay each month.
- 5Review how many years you shave off your loan and how much interest you save.
Payoff Acceleration
By adding extra money to your monthly payment, 100% of the extra amount goes directly toward reducing your principal balance. This shrinks the base on which future interest is calculated, compounding your savings exponentially over time.
Interest Saved = Total Original Interest - Total New InterestVariables:
PrincipalCurrent remaining loan balanceExtra PaymentAdditional monthly payment applied directly to principalExample
Paying $500 Extra Per Month
Inputs:
Current Balance:$200,000
Interest Rate:6.5%
Remaining Term:20 Years
Extra Monthly:$500
Steps:
- 1.Original Required Payment = $1,491 / month
- 2.New Total Payment = $1,991 / month
- 3.Amortize with regular payment: 20 years, $157k total interest
- 4.Amortize with $1991: 11.6 years, $85k total interest
Result:
Saves 8.4 years and $72,000 in interest!
Frequently Asked Questions
Is it better to pay off my mortgage early or invest the extra money?
This is a personal financial decision. Mathematically, if you can earn a higher after-tax return by investing (e.g., 8% in the stock market) than your mortgage interest rate (e.g., 4%), investing yields a higher net worth. However, a paid-off home provides immense peace of mind and cash flow freedom.